South Africa’s IT company Mustek Profit Takes a Tumble

Mergers, Acquisitions and Financial Results

Computer manufacturer and technology importer Mustek 's profit has taken a serious dive, with a loss of R67,8m caused by foreign exchange fluctuations bringing its figures down, the company announced yesterday.

A review of its structure identified inefficiencies and duplications, and corrective action has begun to contain its costs. But it came too late to prevent a fall in net profit from R87,6m to R52,4m for the year to June , despite revenue rising a fraction to R3,48bn.

Headline earnings per share of 48,6c were down from 76,3c. Mustek has declared a dividend of 10c a share.

It holds R338,6m in cash and the cash being generated by the drive to reduce inventory levels will be used to cut its short-term borrowings.

Another prudent step was to cancel plans for its Zinox division to list on the Nigerian stock market after it bought two Nigerian distribution companies, as the poor economic climate meant it was not in Mustek's best interests to go ahead, said CEO David Kan. He did not give any positive predictions, but highlighted key risks that may affect Mustek's future profitability -- including the erratic electricity supply, the skills shortage and fluctuations in the exchange rate.

However, the trend for businesses not to replace ageing hardware could not be sustained indefinitely. That would see fresh sales coming through for its Mecer brand of computers.

Business Day